Collection period for 'plastic' debt debated

State lawmakers are advancing legislation to spell out once and for all that banks and collection agencies have six years - not three - to pursue people who default on their credit-card debt.

Supporters say that's actually good for Arizonans.

Rep. Jim Weiers, R-Phoenix, said the legislation is the result of a disagreement among various justices of the peace about the statute of limitations for collecting these kinds of debts.

He said some see these as issues of contract while others say it is a revolving line of credit. The result, he said, is that a case filed after three years might be tossed depending on how the individual JP interprets the law.

HB 2412 would specify that all credit-card debts remain collectible for six years.

Senate Minority Leader David Schapira, D-Tempe, said if there is a question, legislators should err on the side of the borrowers.

Sen. Paula Aboud, D-Tucson, agreed, saying that a six-year time limit does not actually help the banks that first extend the credit.

"The institution ends writing them off and then selling the debt for pennies on the dollar to these out-of-state debt buyers," she said. "Some years later this debt buyer jumps on them for a $2,000 debt that is now $8,000 to $10,000 because of the six-year extended period of time where the interest and fees has accumulated."

But Sen. Linda Gray, R-Glendale, said that longer period for creditors to decide what to do can work in favor of the borrower. "It gives a chance for those who owe the debt to be able to work with the credit-card company and pay off that debt," she said.

And Weiers said those additional years provide time to negotiate with the lender to settle for some smaller amount.

Schapira, however, said giving banks and collectors more time could never be seen as helping a debtor. He said if the time limit is three years and the lender has not filed suit, then the borrower is off the hook entirely.

That possibility riled Sen. Ron Gould, R-Lake Havasu City. He owns a business that installs and repairs air-conditioning equipment.

"We need to remember on credit-card debt that no one held a gun to people's heads to make them run up this debt," he said. "This is money that is owed to people."

Gould said some people use the system to "get around" paying the money they owe.

Schapira said shortening the statute of limitations to three years would not absolve anyone of a debt. All it would do, he said, is assure that the lenders file the necessary legal papers within that time period or lose their right to collect.

Gray, however, said putting in the shorter deadline is a bad idea. "The longer you wait on your debt, you don't have to pay it," she said. "And I think that's the wrong message."